After two months of turmoil, there is finally some wonderful news for the stock. Previously, I talked about why Lending Club (NYSE:LC) will have a tough time bouncing back (read Lending Club Has One Year). Between falling origination volume and a lack of capital, it was just only a matter of time before the company folds - unless the management can find a way to regain investor confidence. Until now, the company has not been successful. Just three weeks ago, private letters leaked that the company may be planning to wind-up one of its funds. So what happened? By hiring Patrick Dunne as the Chief Capital Officer last week, Lending Club has taken a huge step forward in restoring investor confidence.
Why This Is A Big Deal
A Chief Capital Officer's duty is to source capital. Over the past two months, the management has tried to accomplish that very goal, but to no avail. There are two reasons. First, there is no trust between the existing management and outside investors. You can't really blame the capital providers and brokers (i.e. hedge funds, investment banks). If the management was willing to lie to their faces, why should they trust the management now? Secondly, no one wants to work for a sinking ship. With the stock down in the gutter, ex- CEO dumping shares, and the whole Street going against the company, where is the future?
And so it's a miracle that Lending Club was able to nab Patrick Dunne. He had recently retired from BlackRock (NYSE:BLK), so it was quite a coincidence. Considering that Patrick would not have to put his professional career on the line by working with a failing company, Lending Club got very lucky.
Why is this man the key to Lending Club's survival? Let's take a look at his past titles. He has served as the President of BlackRock Asset Management International, the Head of iShares Global Markets and Investments, the Global Head of Securities Lending And Cash Management, the COO of Barclays Global Investor Services Europe, and the Head of Strategy at Global Investor Services North America, just to name a few.
What's so special about these job titles? First, Patrick clearly has a global network, given his service in international divisions. Secondly, he is a master marketer. Perhaps this is not obvious from the job titles, but one of his biggest roles at any of the firms listed above would've been marketing.
Take the iShares business. There are literally thousands of ETFs under the iShares brand. Many fail (like Lending Club) every year, Patrick was able to grow that business nevertheless. So even though many products failed to perform (much like Lending Club) and were eventually shut down, Patrick was able to convince more and more investors to buy more of iShares' products anyways ( check out the growth in Australia). That is a rare skill to have. Given the growth of the iShares business, we can be sure that investors trust him no matter what.
His experience as a Head of Strategy is also worth mentioning. The name is a bit of a misnomer in my opinion, as a strategist's job is not to make money for clients, but to pitch ideas so that the bank can make money. This is certainly a good experience to have when he deals with Lending Club's assets, which have been eschewed by some of the prominent hedge funds. He can draw on his experience as a strategist to "spin" Lending Club's assets as a potentially attractive investment.
By combining Patrick's global reach and his unique skill set, I believe that Lending Club's need of capital could be fulfilled soon. Of course, it is yet to be seen whether Patrick can overcome Lending Club's stigma. Nevertheless, I believe that daring investors may want to pick up a few shares to bet on a continuation of rapid growth once the money flows again.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.